Assume we've the following scenario:
You invest US$5,000 upfront to manufacture 500 product units and each product costs US$10 including shipping and everything.
You mark up each product to US$20 and sell it at that.
Now, assume in a perfect scenario, you sell all 500 units, so total revenue is 500 units * US$20 = US$10,000.
So, the profit is US$10,000 - US$5,000 = US$5,000
So, now you need to restock the products right? So you re-invest the US$5,000 profits back into buying 500 product units again. And the cycle continues.
What I don't understand is, how does one even make money or pay yourself any salary this way? It's an infinite loop and you're basically earning ZERO dollars throughout the process because all profits need to go back to purchase new stock.
Plus, if you look closely at the example above, it's actually a LOSS because you haven't factored in the time you spent, as well as any faulty returns + customer acquisition costs and ads etc.
Heck, there's not even money left to manufacture new types of products!
How do folks make inventory-based businesses profitable based on above example?
You invest US$5,000 upfront to manufacture 500 product units and each product costs US$10 including shipping and everything.
You mark up each product to US$20 and sell it at that.
Now, assume in a perfect scenario, you sell all 500 units, so total revenue is 500 units * US$20 = US$10,000.
So, the profit is US$10,000 - US$5,000 = US$5,000
So, now you need to restock the products right? So you re-invest the US$5,000 profits back into buying 500 product units again. And the cycle continues.
What I don't understand is, how does one even make money or pay yourself any salary this way? It's an infinite loop and you're basically earning ZERO dollars throughout the process because all profits need to go back to purchase new stock.
Plus, if you look closely at the example above, it's actually a LOSS because you haven't factored in the time you spent, as well as any faulty returns + customer acquisition costs and ads etc.
Heck, there's not even money left to manufacture new types of products!
How do folks make inventory-based businesses profitable based on above example?
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